House prices sink for a second year

Chris Vedelago

Australian home values have fallen for the second year in a row, marking the worst run for the national property market in 16 years.

The slide comes despite the Reserve Bank of Australia slashing the cash interest rate six times in little more than a year, suggesting the availability of cheaper credit is only tempering the property slump rather than kick-starting a recovery.

Analysts RP Data-Rismark report that capital city dwelling values fell 0.4 in 2012, with the decline coming on the back of a 3.8 per cent fall in 2011.

‘‘This is the first time we’ve had back-to-back value declines for an index that goes back to 1996,’’ said RP Data senior research analyst Cameron Kusher. ‘‘It is clear that the previous strong value growth conditions to which many home owners became accustomed to in recent years are well and truly behind us.’’

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Mr Kusher said the interest rate cuts amounting to a 135 basis point fall since October 2011 had ‘‘helped’’ the market but were being blunted by weak consumer confidence and affordability concerns.

‘‘The median price of a dwelling across the country is $483,000 – that’s a big commitment. And I just don’t think people are showing a large propensity to go and make that sort of commitment at the moment. People aren’t used to these kind of conditions.’’

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Melbourne down, Sydney up

Melbourne has continued to be a drag on the national property market, with dwelling values falling 2.9 per cent over the year. It was far and away the worst performance for any capital city. Brisbane and Adelaide were next after experiencing declines of 0.8 per cent.

Sydney dwelling values were up 1.5 per cent, primarily thanks to a stronger performance in the unit market which increased by 2.3 per cent compared to houses at 1.3 per cent. Perth values rose 0.8 per cent, but Darwin proved to be the best performing capital city, registering an annual growth rate of 8.9 per cent.

‘‘It’s a strong performance but values are still 10.7 per cent lower than where they were at their peak,’’ Mr Kusher said.

Looking ahead, RP Data is forecasting another weak year for the national market, with values expected to rise in line with inflation at best.

The outlook has been echoed by Barry Plant of national estate agency Barry Plant, who said it could take at least two years for the market to noticeably improve.

‘‘I don’t think the market will move a lot in 2013, but the one thing I don’t think it will do is go backwards,’’ Mr Plant said. ‘‘I think 2015 will be the time you’ll start to see things reboot.’’